Comments on: So How'd They Do That?http://climateaudit.org/2008/12/07/so-howd-they-do-that/
by Steve McIntyreTue, 03 Mar 2015 15:36:38 +0000hourly1http://wordpress.com/By: My “wish list” for the climate sciences in 2009 « Fabius Maximushttp://climateaudit.org/2008/12/07/so-howd-they-do-that/#comment-169567
Fri, 02 Jan 2009 00:44:25 +0000http://www.climateaudit.org/?p=4563#comment-169567[…] A clear example of the struggle to bring data in to public view is seen in these posts at Climate Audit: here and here. […]
]]>By: Geoffhttp://climateaudit.org/2008/12/07/so-howd-they-do-that/#comment-169566
Mon, 15 Dec 2008 05:31:14 +0000http://www.climateaudit.org/?p=4563#comment-169566Now that critical secrets of No. 10 Downing Street are out (see here) I have no doubt that data requests from less consequential figures requested under the FOI procedure will soon be having success.
]]>By: Kenneth Fritschhttp://climateaudit.org/2008/12/07/so-howd-they-do-that/#comment-169565
Sun, 14 Dec 2008 00:07:37 +0000http://www.climateaudit.org/?p=4563#comment-169565Re: Ross McKitrick (#51),

High return, over a relatively short period of time, implies a high risk investment. A secret algorithm implies more risk and possible fraud.

I have heard that the investors were chided to invest by the mantra, not that were not making money on their investments, but that they were not making the highest returns.

The psychology of a consensus on this investment was a driver over those of skeptics’ warnings. While fraud is bad and needs too be punished, I somehow cannot bring forth much sympathy for the dumb asses with at least a million dollars to throw away that failed to do any due diligence.

Our Social Security and government health care systems have been referred to as Ponzi schemes, but here the evidence is there for all to see. But do people see or even want to see?

[Indeed, says Madoff, the firm itself has received numerous buyout offers but has so far refused any
entreaties because he and the many members of his immediate and extended family who work there
continue to enjoy what they do and the independence it allows and have no desire to work for someone
else.]

Yeeeeeeeeessssss.

]]>By: berniehttp://climateaudit.org/2008/12/07/so-howd-they-do-that/#comment-169562
Fri, 12 Dec 2008 21:51:26 +0000http://www.climateaudit.org/?p=4563#comment-169562Ross:
The parallel WSJ article mentions the plaintive voice of one skeptic who no one would listen to. He proved to be correct, while smart guys running hedge funds got smashed. Most of the time, if it is too good to be true – it is too good to be true. Me, I have been largely in cash since the Dow went through 11000 in 2007. I sure felt foolish when it went to 14000 – but now I do not feel so bad. Between the lack of economic fundamentals and the plain excesses of many in the financial community, I am afraid that we are going to be in for a very long and difficult period.
]]>By: Ross McKitrickhttp://climateaudit.org/2008/12/07/so-howd-they-do-that/#comment-169561
Fri, 12 Dec 2008 21:02:38 +0000http://www.climateaudit.org/?p=4563#comment-169561Financial blog Naked Shorts, via The Big Picture Blog, presents a nifty article from 2001 asking “How’d they do that?” in another context: a $50 billion New York hedge fund whose secret algorithm yielded remarkable returns year after year. Some quotes before I reveal the context:

Skeptics who express a mixture of amazement, fascination and curiosity about the program wonder,
first, about the relative complete lack of volatility in the reported monthly returns…experts ask why no one has been able to duplicate similar returns using the strategy

[To] those who express astonishment at the firm’s ability in those areas, Madoff points to long experience, excellent technology that provides superb and low-cost execution capabilities, good proprietary stock and options pricing models, well-established infrastructure, market making ability and market intelligence derived from the massive amount of order flow it handles each day. The strategy and trading, he says, are done mostly by signals from a proprietary “black box” system that allows for human intervention to take into account the “gut feel” of the firm’s professionals.

Still, when the many expert skeptics were asked by MAR/Hedge to respond to the explanations about the funds, the strategy and the consistently low volatility returns, most continued to express bewilderment and indicated they were still grappling to understand how such results have been achieved for so long. Madoff, who believes that he deserves “some credibility as a trader for 40 years,” says: “The strategy is the strategy and the returns are the returns.” He suggests that those who believe there is something more to it and are seeking an answer beyond that are wasting their time.

As for the specifics of how the firm manages risk and limits the market impact of moving so much
capital in and out of positions, Madoff responds first by saying, “I’m not interested in educating the world on our strategy, and I won’t get into the nuances of how we manage risk.” He reiterates the undisputed strengths and advantages the firm’s operations provide that make it possible.

Of course this is entirely off-topic, but I thought readers might find it interesting.

]]>By: Robinsonhttp://climateaudit.org/2008/12/07/so-howd-they-do-that/#comment-169560
Thu, 11 Dec 2008 17:44:28 +0000http://www.climateaudit.org/?p=4563#comment-169560It’s called Policy Based Evidence Making. I believe Eisenhower warned against it. We seem to be knee deep in it at the moment, across a broad range of different areas.
]]>By: John Laidlawhttp://climateaudit.org/2008/12/07/so-howd-they-do-that/#comment-169559
Tue, 09 Dec 2008 15:38:33 +0000http://www.climateaudit.org/?p=4563#comment-169559Re: KevinUK (#47),

Sorry Kevin – wasn’t trying to besmirch the good name of VB programmers (that would include me, you see :). Merely referring to the old “Shooting Yourself in the Foot” with various programming languages; the thing is that in VB you can shoot yourself in the foot repeatedly, but you’re having so much fun you don’t care… ;)